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I've just bought some ILU based on their full year report out last week for the SMSF (pension phase account). Looking to grab the 55c dividend before the ex-div date of 5 March. ILU looks like an all round good buy at the moment with Zircon and Rutile prices looking sustainable in the medium term and with limited new supply (compared to say iron ore). The fully franked dividend is the deal clincher for me. Which leads me to my question...

I've seen the Thompson Reuters analyst forecasts of eps for 2012 of 282.8 and 340.5 for 2013 and for dividends of 153cps for 2012 and 186cps for 2013. Aegis is providing consensus forecasts of 259.6 eps for 2012 and 365.3 eps for 2013). At current prices this works out to a forecast PE of 6 for 2012 falling to 5 for 2013.

While the company said in its recent report that it is targeting a dividend payout rate of 40% of free cash flow it came with some caveats. Those dividend forecasts seem very high to me. I see that they were last updated 25 Jan. I wonder if they will come down with the next consensus update?

I guess the main risk over the medium term is the market price of zircon and rutile. Does anyone have any opinions on the price outlook and also on the earnings and dividend outlook for this company?

For me, for the medium term, at the current price ILU is looking good. Good potential for capital gain, good potential for substantial dividend yield. Even if the dividend is held at 75c fully franked for the next year or two that still represents 6.5% yield (with franking credits). I'd hope for better than that, but I've jumped in and going to give this one a go.